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Why has Hyundai launched an IPO in India?
The South Korean auto giant Hyundai launched its initial public offering (IPO) on Tuesday, billed as India’s biggest stock market debut, worth about $3.3 billion (€3.05 billion).
The first carmaker to go public in India since Maruti Suzuki in 2003, Hyundai is offering 142 million shares for sale, which represents about 17.5% of the total shares of its Indian arm.
Retail bidding, priced at 1,865 rupees ($22.20/€20.35) to 1,960 rupees per share, is expected to continue until Thursday. The stock market listing is expected to begin on October 22.
Already India’s second-largest carmaker by sales, Hyundai is keen to build on the advantage gained by its early entry into the national market in 1996. Last year, Hyundai sold over 605,000 vehicles in India, a 9% increase from the previous year. It hopes the additional funds will help close the market share gap with leader Maruti Suzuki.
India already has the third-largest auto sector in the world — and it is growing fast. Last year, more than 4.1 million vehicles were sold. The auto sector is a major pillar of the economy and the country’s large, growing consumer base and urbanization rate, along with relatively low production costs, make it an ideal location for Hyundai to manufacture and sell its vehicles.
India’s government is keen to boost domestic electric vehicle production, which aligns with the Korean carmaker’s strategy.
Hyundai also sees India as a critical alternative to China and Russia, where sales have dropped because of geopolitical issues. The South Asian country offers a more stable environment to its peers.
How does the IPO compare with others in India?
Globally, Hyundai’s IPO will be the second largest this year in terms of money raised, following July’s listing by Lineage Logistics, the world’s largest cold-storage firm, worth $5.1 billion.
Hyundai’s listing will eclipse the 2022 IPO of the state-run Life Insurance Corporation of India, in which the government sold a 3.5% stake and raised $2.7 billion.
Other top domestic listings in recent years include fintech giant Paytm, whose IPO was worth $2.2 billion in November 2021, and Coal India, which went public in 2010 at a value of $1.8 billion.
India’s stock market has been booming over the past four years, growing by 210% between April 2020 — during the first pandemic lockdown — and last month. On Tuesday, the SENSEX, the index of the Top 30 stocks on the Bombay Stock Exchange, was trading at 81,820.
India recently pipped Hong Kong to become the fourth-largest stock market in the world.
Big investors snap up shares
In a sign of the popularity of Hyundai’s listing, nearly $1 billion in shares were snapped up by institutional investors on Monday.
The government of Singapore and BlackRock, the giant US investment firm, picked up stakes worth a total of $77.3 million, while Fidelity bought shares worth $76.5 million and domestic mutual funds were allocated shares worth a total of $340 million.
Retail investors snapped up 18% of the available shares by the end of Tuesday, the first day of the public offer, media reported.
What are Hyundai’s plans in India?
India’s auto market has rapidly become ultracompetitive, and smaller domestic rivals Tata Motors and Mahindra & Mahindra have eaten into Hyundai’s market share.
“India is one of the most exciting auto markets in the world,” Unsoo Kim, managing director of Hyundai’s Indian unit, told a news briefing in Mumbai last week. “[The] IPO will ensure that Hyundai Motor India is even more dedicated to succeed in India.”
Hyundai plans to use proceeds from the IPO to enhance its research efforts and develop new cars, seeking to transform the country into a production hub for other countries in the Global South.
Hyundai already delivers its India-made vehicles to more than 90 countries.
“We intend to become a global manufacturing hub for Hyundai for the emerging markets,” Tarun Garg, chief operating officer of Hyundai India, told the Reuters news agency. “In [the] next 3-4 years, [a] 30% increase in production will improve our domestic and export volumes.”
The Korean automaker has already invested $5 billion in the country and plans to pump in another $4 billion over the next decade to help make its Indian operations a key plank of its electric vehicle (EV) production, as well as building EV infrastructure such as charging stations and a battery assembly plant.
Hyundai currently has one manufacturing plant in India for local sales and exports. Production at a second plant is expected to begin operations in 2025, which will help take the firm’s total capacity in India to beyond 1 million units a year.
Edited by: Rob Mudge